Column: Consider stocks that pay dividends
Submitted by editor on Fri, 12/27/2013 - 12:18pm
With the low interest earnings on Money Market, Checking and Savings Accounts, consider purchasing stock in some good, big, quality companies that pay dividends.
Your stockbroker can give you a list of companies that pay more in dividends then you are earning in interest and you have a chance the stock will increase in value over time.
An example is McDonald’s. They have increased the dividends they pay since about 2002 and the price of the stock has increased since 2002. If you think they will continue to do well in the future, take a look at their annual reports for the last five years and especially how their dividends have increased to about a 3 percent level.
Another example to consider is IBM. They have moved from making computers to more consulting work and computer programs. IBM has good cash flow and the dividends are about 2% of the price of the shares. Yes, they have competition, but they also have a lot of patents and probably more patents to be awarded in the future.
If you like AT&T prospects, you’ll really like the dividend yield of over 5 percent!
Railroads are doing well now. Take a look at some of the big, strong railroads.
A company like Fastenal (they sell lots of industrial and construction supplies, fasteners, tools, blades, pipes and chains). The dividend yield on Fastenal stock is over 2 percent.
Did you hear about the guy who said he wanted an attorney with only one arm? He said they were always saying “on the other hand…”.
If you don’t feel comfortable picking a few good stocks that pay dividends, consider some of the mutual funds that are available today.
Vanguard (started index funds) has a fund called Vanguard Dividend Growth. It earns about 1.9 percent but it is diversified (owns many different stocks). There are other mutual funds that invest in companies that pay dividends or are increasing the dividends they will pay. With many big companies sitting on a lot of cash, paying dividends or increasing the dividends is a common action.
Some mutual funds you can buy have a “sales charge” or “load.” That is really an extra cost of the commission to the seller. Some mutual funds have no or very low “sales charge.” The idea of an index fund is you buy a basket of stocks and the expense of running the mutual fund is low-not much buying and selling.
If you choose to invest some of your savings, consider stocks that pay dividends.
Did you hear: “A river is like intelligence – the deeper it is, the less noise it makes.”
— John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.
